American Economic Power Hasn't Declined

International Studies Quarterly (2013) 57, 817–830

American Economic Power Hasn’t Declined—It Globalized! Summoning the Data and Taking Globalization Seriously1

Sean Starrs York University

This paper argues that a fundamental failing in the debate on the decline of American economic power is not taking globalization seriously. With the rise of transnational corporations (TNCs), transnational modular production networks, and the globalization of corporate ownership, we can no longer give the same relevance to national accounts such as balance of trade and GDP in the twenty-ﬁrst century as we did in the mid-twentieth. Rather, we must summon data on the TNCs themselves to encompass their transnational operations. This will reveal, for example, that despite the declining global share of United States GDP from 40% in 1960 to below a quarter from 2008 onward, American corporations continue to dominate sector after sector. In fact, in certain advanced sectors such as aerospace and software—even in ﬁnan- cial services—American dominance has increased since 2008. There are no serious contenders, including China. By looking at the wrong data, many have failed to see that American economic power has not declined—it has globalized.

An enduring debate in international studies is on the Reagan, by the 1990s, the United States seemed once nature of American economic power. Broadly speaking, again unstoppable. The Soviet Union—the US’s only geo- there have been three waves of conventional wisdom political rival—collapsed, the American economy came over the past three decades. With the post-World War II roaring back with an advanced technology boom coupled economic revival of Western Europe and Japan by the with the economic malaise of Western Europe and most 1960s, mounting US balance of payments deficits, the of all Japan, and the world came closer than ever before end of dollar-gold convertibility in 1971, the onset of to the post-1945 US goal of a liberalized global economy. stagflation in the 1970s, among other factors, by the Indeed, in the ensuing voluminous literature on global- 1980s many argued that American economic preponder- ization, many did not even regard the explosion of cross- ance was fading or in fact no more (Calleo 1987; Cox border flows as having anything to do with US policy and 1987; Gilpin 1987). Paul Kennedy (1988) encapsulated American corporations—or any nationality at all since it the zeitgeist in his Rise and Fall of the Great Powers,an was argued that globalizing forces threatened the very international bestseller selling over two million copies, existence of nation-states (Reich 1991; Ohmae 1995; arguing that the United States was increasingly faced Hardt and Negri 2000; Robinson 2004). Others, by con- with “imperial overstretch”—declining economic trast, saw the United States as both the central driving resources to support overseas military commitments force and key beneficiary of globalization (Nye 1990; made in a bygone era. One important dissenter, how- Chomsky 1994; Gowan 1999; Lundestad 1999). ever, to the declinist sentiment was Ronald Reagan: The debate changed dramatically with the presidential Elected President of the United States on the premise election of George W. Bush and the US-led invasions of of continued moral and material American supremacy, Afghanistan and Iraq in 2001 and 2003, respectively. The Reagan paid no heed to those who characterized a epithet “Empire” migrated from the Leftist fringe to the world of “after hegemony” (Keohane 1984). He pro- highest echelons of the US government, and conven- ceeded to throw a wrench in Japan’s economic machine, tional wisdom saw the United States at the pinnacle of its most importantly by pressuring Japan to impose “volun- power (Bacevich 2002; Ikenberry 2002; Ignatief 2003; tary export restraints” and to appreciate the yen with Kagan 2003; Brzezinski 2004). Even Paul Kennedy the 1985 Plaza Accord. At home, the Reagan Administra- (2002:1), who wrote of the dangers of “imperial over- tion cut taxes, “flexibilized” labor in part by weakening stretch” less than fifteen years before, declared that “the unions, shot up interest rates to record levels,2 ramped eagle has landed” with “America’s spectacular position in up military spending, and the balance of payments the world in military, economic, technological, and cul- deficit: What came to be known as Reaganomics. tural terms.” And yet only a few years later, with the rise Whether or not Reagan’s policies “worked,” and of Brazil, India, Russia, and most of all China, coupled in certainly there were many other factors irrespective of 2008 with the largest Wall Street crash since 1929, decli- nism returned with a vengeance (Khanna 2009; Friedman 1 Author’s notes: I am very grateful to James Parisot and Roy Starrs for com- and Mandelbaum 2011; Prestowitz 2011; Zakaria 2011; ments on previous drafts, and to three anonymous ISQ reviewers for immen- Layne 2012). Many of the same themes from the earlier sely helpful criticism. I am also grateful to Leo Panitch and Jonathan Nitzan 1980s debate returned, with Iraq replacing Vietnam and for the intellectual champagne they served during my PhD, without which this the rise of China replacing the rise of Japan as marking paper could not have been written. All faults are my own. I thank the Social Sciences and Humanities Research Council of Canada for funding. See online the shift of economic power to East Asia. The American Supporting Information Table S1 for methodology used in Table 1. budget deficit soared to unprecedented heights and in 2 While Federal Reserve Chairperson Volcker began increasing interest August 2011 for the first time ever Standard and Poor’s rates under Carter, he raised them to record levels under Reagan. stripped US government debt of its triple-A rating. Paul

Starrs, Sean. (2013) American Economic Power Hasn’t Declined—It Globalized! Summoning the Data and Taking Globalization Seriously. International Studies Quarterly, doi: 10. 1111/isqu.12053 © 2013 International Studies Association 818 American Economic Power Hasn’t Declined

Kennedy (2011) could once again change his mind and underestimates American economic power due to the increas- declare that American dominance is over. ing globalization of corporate ownership in the 1990s. And so, the conventional wisdom has swung from Amer- American investors are not only the predominant owners of ican decline in the 1980s to American unipolarity in the American corporations, but also the largest owners of top 1990s and American Empire by the early 2000s, and now European corporations and significant owners of top corpo- back to decline with the Great Recession coupled with the rations domiciled in the rest of the world. And as American ever-onward rise of China. But is it really possible for the investors own and thus profit from the world’s top TNCs strength and weakness of the material underpinnings of (whether US-domiciled or not) more than any other nation- American power to flip-flop so wildly over the decades? ality, American citizens continue to own the predominant Especially considering the sudden discursive deluge of share of the world’s wealth—much more than America’s “American Empire” during the early 2000s and its equally declining share of world GDP would suggest. Section III will sudden vanishing by the late 2000s, can power in world summarize the empirical findings, discuss wider theoretical order come and go as quickly as the latest Hollywood implications, and conclude that American economic power celebrity debutante? On the other hand, while the conven- has actually increased in the age of globalization. tional wisdom on American decline or renewal vacillates, whenever one side is prominent one can always find dis- The Implications of Globalization on Aggregating senters, including in the present.3 Thus, three decades National Power later, we seem no closer to resolving this debate. How is it possible to look at ostensibly the same data and world First a note on power. Robert Dahl (1957) provides a clas- events and come away with antithetical conclusions? sic definition, as the power of A to get B to do something This paper argues that virtually the entire three-dec- B would not otherwise do. Hence, power is necessarily ades long debate on the decline or persistence of Ameri- relational and never universal across all actors in all situa- can economic power is marked by a lack of empirical tions. Therefore, David Baldwin (1989:166) rejects the rigor and clarity on the one hand and a failure to ade- concept of “Great Powers” in the abstract, as those with quately consider the implications of the rise of transna- preponderant resources (hence with potential power) do tional corporations (TNCs) on the other. These two not always subdue the weak (actual power): The primary failings are mutually reinforcing. While far too many example being the US defeat in Vietnam. Steven Lukes commentators do not present systematic empirical evi- (1974), however, criticizes Dahl’s conceptualization as too dence to begin with, of those who do, many focus pre- narrow, ignoring crucial dimensions such as the capacity dominantly on national accounts such as balance of trade to shape the agenda and/or initial preferences of others; and gross domestic product (GDP), as if these measures that is, structural power. Joseph Nye (2011) also argues mean the same today in the age of globalization as they that power is multidimensional and that a power-as- did in 1950 when economic activity was far more nation- resources approach can still be useful in determining ally contained. Rather, we must focus on the TNCs them- national economic power. As others also argue (Waltz selves in order to capture their transnational operations. 1970; Strange 1987; Panitch and Gindin 2012), the sheer This is also because, after decades of increasing mergers size of the American market gives the US state structural and acquisitions and globalization (not to mention the power, as foreign corporations (and their respective collapse of communism), the world’s top TNCs (whether nations) seek access. Furthermore, unlike neoclassical private or state-owned) now account for the lion’s share economics, I assume that corporate profit-making is inher- of global economic activity, whether directly or indirectly ently a power process, not only because of class struggle via an ecosystem of supporting small- and medium-sized (the more profit for owners, the less wages for workers, enterprises. This is not to argue that nation-states no and vice versa)4 but also because accumulation is differ- longer matter; far from it, as we shall see. But it is to ential vis-a-vis competing corporations.5 Thus, as profit is argue that an empirical investigation of TNCs will reveal both means and end of accumulation, it indicates both important developments in the global political economy potential and actual power. I return to theoretical impli- that are largely absent in the debate on American cations in Section III. decline, with wider theoretical implications on the nature The point for now is that national accounts are no of power in world order. longer adequate for the power-as-resources approach pre- I shall expand this critique in Section I that to adequately valent in the debate on American decline. In the 1950s, consider the globalization of economic activity, we must corporations home-based in a particular country operated move beyond national accounts and investigate the TNCs predominantly within the boundaries of that country, so it themselves. Section II proceeds to do just that, focusing on made sense to treat the weight of a country’s GDP as the profit-shares of the top 2000 corporations in the world roughly equivalent to the weight of the corporations ranked by Forbes Global 2000; and organized across twenty- home-based within that country relative to the world. If five sectors. We shall see that corporations domiciled in the Japan’s GDP was rapidly rising, one could surmise that Jap- United States continue to dominate by far the largest range anese corporations were also rapidly rising (as indeed they of sectors, in particular, those involving advanced technol- were). But beginning in the 1960s with the expansion of ogy and knowledge. In fact, since 2008, American American corporations into the domestic markets of dominance has increased in key sectors such as financial ser- Canada and Western Europe and by the 1990s encompass- vices and software, with no serious contenders on the hori- ing the top corporations from many countries expanding zon, including China. I shall then argue that this globally, this equivalency between the relative weights of a nation’s GDP and of the corporations domiciled in that nation begins to break down. Thus, even if American GDP 3 For example, in the 1980s on the persistence of American power see Russett 1985; Strange 1987; Gill and Law 1988. In the 2000s on American 4 decline see Wallerstein 2003; Arrighi 2007. On American persistence post- See Brennan 2013 for an empirical analysis of this inverse relationship. 2008 see Cumings 2009; Kagan 2012; Lieber 2012; Nye 2012; Panitch and Gin- 5 See Nitzan and Bichler 2009 for a reconceptualization of capitalist accu- din 2012. mulation centered upon a power (contra labor or utility) theory of value. Sean Starrs 819 relative to the world is in decline, this does not necessarily not easily replicable with far fewer firms being able to com- imply that American corporations are in decline. Con- pete. This is partly because design requires high-cost versely, even if Chinese GDP is rapidly rising, this does not expenditures in R&D over the long-term with a high risk necessarily imply that Chinese corporations are rapidly of failure, and the fruits are legally protected via intellec- increasing their global competitiveness. tual property rights preventing easy replication.7 The Rather, given the implications of corporate globaliza- fewer the competitors the more premium the value added, tion, these questions must be empirically investigated. For and the higher the costs of entry, let alone success. example, when the Japanese domestic automobile market It is important to note that these modular production became one of the largest in the world in the era of networks are transnational insofar as the various modules nationally contained capital, this indicated the strength are dispersed across a number of countries, while still of Japanese carmakers and gave them a strong base from being coordinated and ultimately controlled by a single which to compete internationally. China, however, sur- firm. Hence, even though activities are widely dispersed passed the United States in 2009 to become the largest across the globe, power is still highly concentrated. automobile market in the world (by volume), yet in an Apple, for example, sources components for iPads and era when foreign TNCs can be significant competitors iPhones from other firms based in Japan, South Korea, within a domestic market, this does not necessarily indi- the United Kingdom, the United States, and so on, while cate the strength of Chinese carmakers. In fact, foreign Apple specializes in high value-added branding, customer corporations (dominated by General Motors and Volkswa- service, design, marketing, and R&D. Furthermore, Apple gen) account for more than 70% of the Chinese domes- coordinates this component sourcing from myriad suppli- tic automobile market (Waldmeir 2012): Despite two ers around the world and then subcontracts a Taiwanese decades of strong Chinese state intervention and protec- firm, Hon Hai Precision Industry, to perform final tion (Chin 2010), the 120 Chinese carmakers cannot assembly. Hon Hai Precision Industry performs this final even compete in their own home market let alone inter- assembly through its subsidiary Foxconn in various facto- nationally. The difference between the rise of the West ries across China, which are then exported to the rest of German, Japanese, and South Korean auto sectors during the world.8 the era of national capital is stark. As a consequence, China has a virtual monopoly on A similar point can be made concerning national trade the export of iPads and iPhones and, more broadly, has statistics: Much ink has been spilled on the massive Amer- been the largest electronics exporter in the world since ican trade deficit with China as indicative of America’s 2004 (OECD 2005). But in the era of transnational mod- weakness and China’s strength (Arrighi 2007; Friedman ular production networks, the fact that China is the larg- and Mandelbaum 2011; Layne 2012). In the era of est exporter of finished smartphones and tablets—with nationally contained capital, when most processes of pro- the consequent overwhelming trade surplus in these duction were conducted in-house by a single corporation goods—and the fact that made in China electronics flood in a single country, and then, the finished commodity the American market today just as made in Japan radios was sold abroad at the expense of corporations producing flooded the American market half a century ago, does the same commodity in another country, it made sense to not at all necessarily imply that Chinese firms are world view a trade surplus as indicating the strength of that leaders in electronics. Nor does the fact that China country’s corporations in that particular commodity. exports virtually all iPads and iPhones necessarily mean When transistor radios made in Japan began flooding the that Chinese firms reap the largest profit from the sale of American market in the 1950s and 1960s, the consequent these iPads and iPhones, or electronics more generally. rise in Japan’s trade surplus with the United States indi- In fact, it does not even mean that a Chinese firm is per- cated the success of Japanese corporations such as Sony forming final assembly. On the contrary, it is a Taiwanese at the expense of American corporations such as RCA. firm, Hon Hai Precision Industry, that employs over one But beginning with outsourcing in the 1970s, TNCs million Chinese workers (China’s largest private began to operate differently, eventually leading to what employer) to conduct final assembly of electronics such some scholars call “modular production networks” (Stur- as iPads and iPhones in China, but the profit from this geon 2002; Steinfeld 2004; Yusuf, Altaf, and Nabeshima final assembly largely goes to Taiwanese shareholders, 2004; Nolan, Zhang, and Liu 2008). That is, many TNCs especially to the Taiwanese billionaire founder Terry split the production process into modules ranging from Gou.9 Even still, the profit that Hon Hai Precision Indus- low value–added assembly to high value–added branding try makes from the assembly of iPads and iPhones in and research and development (R&D). The low value– China is peanuts compared with the profit that Apple added modules are outsourced and subcontracted to ultimately makes from owning the proprietary design and other firms, while the TNCs specialize in the high value– brand.10 After all, Apple emblazons on many of its prod- added modules. Final assembly is low value because it is ucts: “Assembled in China, Designed in California.” Thus, easily replicable and can be subcontracted to one or a few in an era of transnational modular production networks, of a large number of firms (often in the thousands).6 national trade statistics do not even begin to capture These thousands of firms compete largely by cost-cutting these complex networks and are an inappropriate mea- (hence are often based in countries with low labor costs) and rarely compete by offering proprietary knowledge. Design is high value because it is proprietary knowledge 7 Even if intellectual piracy occurs, much of today’s advanced technology blueprints require a host of accompanying intangible assets that cannot simply be copied but must be developed over time (Beckley 2011; Ernst 2011). 8 6 Notable exceptions are Aerospace and Defense, and Automobiles. Firms See Linden, Kraemer and Dedrick 2007; FT.com’s In Depth: Apple, In in these sectors still perform final assembly, as the manufacturing process Depth: Foxconn. 9 itself involves proprietary design and advanced technology. For example, In 2012 Hon Hai Precision Industry is 48% Taiwanese owned and the Boeing still assembles aircraft in the United States; hence the US has a trade largest shareholder is Terry Gou with 13% (Bloomberg Professional). surplus with China in aircraft as Boeing has a more than 50% market-share in 10 In 2011 Hon Hai Precision Industry’s total profit is $2.6 billion, while China (Rabinovitch 2011). Apple’s is almost thirteen times larger at $33 billion (Forbes Global 2000 2012). 820 American Economic Power Hasn’t Declined sure of economic power. Rather, we must investigate the sider the extent of its lead. If the American share of transnational corporations themselves. world GDP (or whatever other index) declines from 40% Moreover, the globalization of corporate ownership fur- to 30% and the number two country declines from 20% ther complicates matters. Beginning in the 1980s and esca- to 10%, is this really a decline in American dominance? lating in the 1990s, the United States in collusion with In the first instance, the American share is double its such institutions as the International Monetary Fund pres- nearest competitor, and in the second instance triple. sured scores of countries to liberalize their financial mar- Similarly, if the American share has fallen because there kets.11 By the end of the twentieth century, these efforts are many more competitors but the gulf between the Uni- were largely successful as cross-border portfolio investment ted States and number two is similar, is this really Ameri- and mergers and acquisitions (M&As) exploded, and, as can decline? In short, selecting a benchmark for we shall see in the data, it is American firms that were the “dominance” is somewhat arbitrary and in the eye of the most active and the greatest beneficiaries. As a conse- beholder. quence, even if the relative proportion of corporations With these points in mind, I shall first summon that domiciled in the United States in certain sectors has data which I have argued we should be cautious summon- declined, because Americans now own a sizable share of ing: GDP. Figure 1 demonstrates that American GDP rela- corporations domiciled in other countries, this does not tive to the world has indeed declined over the past half necessarily indicate that American citizens are losing their century, from just below 40% in 1960 to fluctuating relative share of global wealth. In an era of greater finan- between a third and a quarter from the 1970s over the cial liberalization, the growth of firms domiciled in for next thirty-five years, finally dipping below 25% in 2008 example Australia or Brazil no longer necessarily implies for the first time in the post-war era. Therefore, if we that this growth predominantly benefits investors that are ignore the implications of globalization and assume we citizens of Australia or Brazil. Rather, because of the glob- still live in an era of nationally contained capital, then alization of corporate ownership, investors that own shares perhaps we would expect the dominance of American in Australian or Brazilian firms could—theoretically at corporations to have similarly declined to a quarter or least—be citizens of any country in the world. In reality, less from 2008 across the various indices relative to the however, ownership of the world’s top corporations is world. highly concentrated amongst a handful of nationalities, Table 1 investigates whether this is true. It presents the and American citizens account for by far the greatest national distribution of profit across the twenty-five broad national share, as we shall see in the data. Again, we must sectors of the top 2000 corporations in the world, ranked investigate the nature of the transnational corporations by Forbes Global 2000 using a composite of four indices: themselves, rather than national accounts. Assets, market value, profit, and sales. There are two data In short, the decades-long debate on the decline or per- sets in Table 1, the first from 2006 and the second from sistence of American economic power cannot be resolved 2012. Hence, we can observe the change over these six without summoning the data, and by summoning the cor- crucial years, between the last full year before the 2007 rect data. Too many commentators present insufficient subprime mortgage crisis, and three to four years after empirical evidence, and too many focus predominantly on the height of the 2008–2009 global financial crisis. The national accounts. Half a century after American corpora- data from 2012 should be sufficient time for the dust to tions began globalizing in the 1960s, national accounts have settled after the lowest point of the financial crisis including bilateral trade statistics no longer provide an for most of the world (with the possible exception of adequate measure of economic power in world order. Con- Europe), allowing us to see which TNCs from which sequently, we must analyze the nature of the world’s top countries have advanced and which have suffered. corporations themselves in order to understand the great Table 1 demonstrates that American corporations changes in their operations and ownership structures over account for by far the most dominant profit-shares across the past several decades, and consider the implications this the most sectors than corporations from any other coun- has on national economic power. The next section pre- try, especially in sectors at the technological frontier. In sents data from Forbes Global 2000, Thomson Reuters, Bloom- fact, in six sectors (Aerospace and Defense; Casinos, berg Professional, and other sources. Hotels and Restaurants; Computer Hardware and Soft- ware; Financial Services; Media; Transportation) Ameri- can leadership has increased over the six years and has The Data: The Top 2000 TNCs, the Globalization of gained ground in a further four (Auto, Truck and Motor- Ownership, and World Wealth cycle; Heavy Machinery; Retail; Utilities). Perhaps most First a note on benchmarks. At what proportion of a noteworthy, three years since the Wall Street crash in given indicator relative to the world should we say marks autumn 2008 and the top American financial services “dominance”? Most commentators agree that American firms have increased their global dominance to 53% of economic power in the years immediately after World the total profit of the financial services sector in the Forbes War II was “dominant,” and the consensus on the propor- Global 2000 (2012).13 And note the unrivalled supremacy tion of America’s GDP relative to the world ranges from of American firms in the Computer Hardware and Soft- 40% (Kennedy 1988:690) to the oft-heard “half.” Does it ware sector, the third most profit-making sector in the follow that any proportion less than 40% should be con- world after Oil and Gas, and Banking. This is all the sidered not dominant?12 Also, it is important to compare more stunning since China surpassed the United States the American share with its nearest competitors and con- as the largest personal computer market in the world in 2011 (Savitz 2011). Again, in the era of nationally con-

11 See Robert Rubin’s memoir (Rubin and Weisberg 2003) for his personal account of these efforts as US Treasury secretary in the 1990s. 13 This may come as a surprise to those who argue that the 2008-2009 12 By contrast, the US Department of Justice uses a Herfindahl-Hirschman financial crisis indicates the weakness of the United States and/or Wall Street. Index of “only” 25% or above to investigate whether a market has “excessive” Section III will discuss further, but see Panitch and Konings 2009 for a discus- concentration. sion on American financial power. Sean Starrs 821

40%

35%

30%

25% US

20% EU 15%

10% Asia- Pacific

0% 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

FIG 1. Triad GDP (Current US$) Relative to World, 1960–2011. Source. World Bank. tained capital, we might expect the largest domestic mar- States at the technological frontier in the foreseeable ket in the world in a particular sector to have a signifi- future is not credible. For example, in Electronics, Chi- cant presence of indigenous corporations in that sector nese firms would have to increase their profit-share by (if not the dominant share). But in the era of transna- 1,000% to match the United States (and only if American tional capital this relationship is no longer axiomatic, firms ceased growth in the meantime). Or in Healthcare and it could be the case that foreign firms dominate a Equipment and Services, China does not have a single country’s domestic market. This is certainly the case for firm in the world’s top 2000 corporations, and the Ameri- American firms in Computer Hardware and Software.14 can profit-share is 84%. Even in Aerospace and Defense, More generally, even if Chinese firms make an appear- where China has been increasing its military spending ance in eight more sectors over the six years and in a exponentially since the 1990s, there is still no Chinese number of sectors advancing significantly,15 note the gen- presence in the Global 2000, and the American profit- eral paucity of Chinese firms at the upper echelons of share sits comfortably at two-thirds of the world.16 There- the majority of sectors. This is striking considering that in fore, considering the actual reality of Chinese firms across 2010 China overtook Japan’s almost four-decade run with most (not all) sectors, it is unclear why so many commen- having the second largest GDP in the world. No one tators speculate that Chinese firms will be able to chal- doubts that China is rising, but China is rising in the era lenge the breadth of American technological dominance of globalization, and the nature of China’s integration at all.17 Again, in the age of globalization, we cannot base into transnational modular production networks is shap- our analysis of economic power on rising GDP alone; we ing the nature of its rise. For example, the Chinese pres- must analyze the TNCs themselves. ence in Electronics is a paltry 4% even though China has This is in addition to the fact that foreign (and partic- been the largest electronics exporter in the world for ularly American) TNCs already dominate China’s domes- nearly a decade. Indeed, over 90% of China’s high-tech- tic market in a slew of goods and services, further nology exports are actually by foreign—not Chinese— hampering Chinese efforts to develop indigenous com- firms (Beckley 2011:43). For example, the Taiwanese firm petitors. I have already mentioned Boeing, Dell, and Hon Hai Precision Industry, is China’s largest exporter General Motors, but consider also Coca Cola and Pepsi, and not only assembles in China for Apple as mentioned for example, with a 55% and 32% market-share, respec- above, but also for Dell, HP, Nokia, Microsoft, Motorola, tively, in Chinese soft drinks (Rappeport 2011). More Nintendo, and Sony. Thus, it is uncertain whether Chi- broadly, despite having to feed and quench the thirst of nese electronics firms can catch up with Taiwanese firms roughly a fifth of the world’s population, the Chinese that merely specialize in assembly, let alone build global profit-share in Food, Beverages and Tobacco is only 3% brands to challenge American corporations head-on. (the American profit-share is 43%). Or, despite having The broader point is that China’s integration into the the world’s largest consumer market by population, Chi- transnational modular production networks of American nese firms account for a miniscule 1% in Retail (and and other TNCs is mostly in assembly (even if this assem- American firms 55%), while Wal-Mart’s market-share in bly is becoming more technologically sophisticated) and China itself (a domestic market with over half a million not innovation (Steinfeld 2010; Ernst 2011). And consid- firms) is the largest at 8%, “reaching 27% of Chinese ering that it is uncertain whether China can catch up households” (Woke 2011). To repeat, in the era of trans- with Taiwan then South Korea then Germany then Japan, national capital we cannot assume that the rapid rise of speculation on China being able to challenge the United a country’s GDP and/or domestic market indicates the rapid rise of that country’s economic power. The world’s

14 For example, 60% of the Internet in China runs on Dell servers (Pal- mer 2011). And while much fanfare was made when the Chinese firm Lenovo 16 In fact, even if Chinese military spending has increased 800% since acquired IBM’s loss-making PC division in 2005, Lenovo’s profit in 2011 was 1989, Beckley (2011:73–74) has shown that relative to the US it has declined half that of the top Taiwanese computer hardware firms, and roughly one- since 2001. twelfth that of Dell (Forbes Global 2000 2012). 17 For at least 200 years since Napoleon supposedly exclaimed, “Let the 15 Banking; Construction; Forestry, Metals & Mining; Insurance; Real Dragon sleep for when she wakes she will shake the world,” many have specu- Estate; Transportation. lated on China’s potential at the expense of analyzing China’s reality. 822 American Economic Power Hasn’t Declined

TABLE 1. National Sectoral Proﬁt-Share of Top 2000 Corporations: 2006, 2012

Sector Year # of Firms/Nations Total Proﬁt ($bn) #1 (%) #2 (%) #3 (%) Notes on China

Aerospace & Defense 2006 17/7 14.7 US 66 UK 11 Netherlands 10 Zero 2012 20/8 25.1 US 67 UK 13 France 7 Zero Auto, Truck 2006 45/12 56.5 Japan 47 Germany 17 US 13 #9 @ 0.6% & Motorcycle 2012 53/13 129.3 Germany 29 US 26 Japan 18 #6 @ 4% Banking 2006 293/26 296.5 US 34 UK 13 Japan 7 #10 @ 2% 2012 264/54 443.5 China 24 US 15 Japan 6 See #1 Business 2006 49/12 17.6 US 53 Japan 12 UK 7 Zero & Personal Services 2012 34/10 18 US 44 Switzerland 15 UK 8 Zero Casinos, Hotels 2006 31/11 16.3 US 46 UK 18 Panama/UK 14 Zero & Restaurants 2012 25/11 23.7 US 64 HK 7 Panama 7 #6 @ 2% Chemicals 2006 59/18 39.9 US 31 Japan 13 Germany 12 #14 @ 1.5% 2012 66/19 79.1 US 25 Germany 19 Saudi Arabia 12 Zero Computer Hardware 2006 68/12 85.2 US 70 ROK 14 Taiwan 7 Zero & Software 2012 78/19 186 US 74 ROK 6 Taiwan 5 #6 @ 2% Conglomerates 2006 31/15 50.2 US 57 Bermuda 8 Netherlands 7 Zero 2012 30/14 66.8 US 43 HK 23 Germany 13 Zero Construction 2006 66/20 35.12 US 34 France 15 UK 10 Zero 2012 64/24 37.6 China 22 France 18 Japan 11 See #1 Electronics 2006 62/10 35.1 US 48 Japan 25 Sweden 7 Zero 2012 57/13 57.8 US 39 Japan 29 Taiwan 10 #4 @ 4% Financial Services 2006 154/27 139.9 US 45 Switzerland 11 Netherlands 10 Zero 2012 95/27 100.9 US 53 ROK 8 Switzerland 6 #4 @ 4% Food, Beverages 2006 72/21 68.9 US 49 UK 15 Switzerland 9 Zero & Tobacco 2012 85/28 112.1 US 43 UK 12 Switzerland 9 #7 @ 3% Forestry, Metals 2006 99/30 84.6 US 13 Japan 9 Russia 8 #11 @ 5% & Mining 2012 117/32 172.2 Oz 17 Brazil 13 China 11 See #3 Healthcare Equipment 2006 53/7 31.2 US 89 Sweden 4 UK 2 Zero & Services 2012 39/9 39.5 US 84 Ireland 5 Germany 4 Zero Heavy Machinery 2006 63/16 29 US 39 Sweden 21 Japan 16 #8 @ 1.5% 2012 68/13 62.7 US 37 Japan 14 Sweden 12 #4 @ 11% Insurance 2006 98/20 89 US 53 Germany 7 Switzerland 7 #12 @ 1.4% 2012 85/22 107 US 41 China 10 Switzerland 9 See #2 Media 2006 55/15 32.2 US 59 UK 10 Japan 6 Zero 2012 37/9 44.5 US 67 France 11 UK 6 Zero Oil & Gas 2006 102/31 277.9 US 38 Netherlands 10 UK 9 #4 @ 6% 2012 123/35 454.1 US 28 Russia 17 UK 9 #5 @ 7% Pharmaceuticals 2006 37/10 82.2 US 51 UK 15 Switzerland 12 Zero & Personal Care 2012 69/19 148 US 49 UK 14 Switzerland 13 #12 @ 0.4% Real Estate 2006 0/0 2012 72/15 64.6 HK 37 China 14 US 14 See #2 Retail 2006 122/19 76.6 US 68 UK 11 Japan 4 Zero 2012 116/26 114 US 55 UK 8 Japan 4 #15 @ 1% Telecommunications 2006 62/37 98.5 US 21 Japan 9 HK 7 #9 @ 2% 2012 59/38 133.9 HK 15 UK 11 Japan 9 #16 @ 2% Trading 2006 23/7 7.5 Japan 74 UK 14 ROK 7 #6 @ 1% Companies 2012 16/5 18.5 Japan 87 HK & ROK 4 India 3 #5 @ 2% Transportation 2006 73/25 46.8 US 27 Japan 15 Denmark 10 #10 @ 1.5% 2012 63/22 50.9 US 31 Japan 14 China 12 See #3 Utilities 2006 109/23 85.5 US 31 Germany 15 Japan 9 #11 @ 1.5% 2012 99/27 98.4 US 27 France 9 UK 9 #10 @ 4%

Source. Author’s calculations from Forbes Global 2000 (2006, 2012). (Notes. HK, Hong Kong; Oz, Australia; ROK, South Korea). top TNCs—which are by far and away domiciled in the tion, however, whether America has declined in certain United States as Table 1 amply reveals—operate around sectors is more ambiguous than would at first seem. Most the globe and thus profit from and often shape activities obvious is Healthcare Equipment and Services, where around the globe, including in “emerging markets” and American decline is from 89% to 84%: This hardly spells certainly in China. doom. More seriously, if we disaggregate to the level of Nevertheless, while American performance has the very top corporations, in some sectors marked by sup- increased in ten sectors since 2006, note that there has posed American decline, there has actually been Ameri- been relative American decline in eleven sectors (Bank- can expansion.18 In Insurance, for example, while the ing; Business and Personal Services; Chemicals; Conglom- total American share declines from 53% to 41%, the erates; Construction; Electronics; Forestry, Metals and Mining; Healthcare Equipment and Services; Insurance; 18 The following corporate profit-shares are author’s calculations from For- Oil and Gas; Telecommunications). Upon closer inspec- bes Global 2000 2012. Sean Starrs 823 number one and two corporations remain American the expense of Western banks (outside of China) nor International Group (AIG) and MetLife, which have actu- indicative of Western decline. ally increased their profit-shares in the Insurance sector Two other sectors that are predominantly nationally from 13% and 5% in 2006 to 17% and 7% in 2012, contained in China are Construction and Telecommuni- respectively. Or in Oil and Gas, while the total American cations, and the rapid growth of China’s GDP has led to share from 2006 to 2012 has declined from 38% to 28%, the rapid growth of its corporations in these sectors rela- the number one corporation remains ExxonMobil and in tive to the world. In regard to Construction, like Banking, 2012 its profit lead over Gazprom, its nearest competitor, this sector greatly benefits from the investment-driven is more than $10 billion, and Chevron has increased its model and the 2009 economic stimulus. Again, both standing from fifth to fourth over the 6 years. Similarly in these conditions are not structurally long term. As for the Electronics, while the total American share has declined United States, its Construction sector collapsed with from 48% to 39%, the number one and two corporations the subprime mortgage crisis and is still reeling from the remain American, and in 2012, another American firm Great Recession. It remains to be seen whether these enters the top five. Moreover, even in Forestry, Metals woes are long term. What is certain to remain in the long and Mining where aggregate American leadership has dis- term, however, is China’s rapid ascent in Telecommunica- sipated since 2006, this masks the extent to which certain tions, with China Mobile (listed in Hong Kong but with American TNCs continue to dominate at the technologi- its main operations in China) rising from fifth place at cal frontier. The aluminum producer Alcoa, for instance, 5% in 2006 to first place at 15% in 2012. With over one has “patented 95% of all aerospace alloys ever created,” billion mobile phone subscribers in China (Flannery and its Davenport, Iowa manufacturing plant “remains 2012), and with the Chinese state likely to continue to the only facility [in the world] that can manufacture air- protect its domestic market from foreign competition, plane wings as a monolithic structure…and today pro- China will lead. Telecommunications Services into the duces wings for almost all planes made by Airbus, foreseeable future. What is interesting to note, however, Boeing, Bombardier and Embraer” (Alcoa.com 2011). is that while China Mobile has a significant lead over its There is unequivocal American decline, however, in competitors in Telecommunications Services, the United three sectors (Banking; Construction; Telecommunica- States continues to dominate the subsector of Communi- tions), and in all three, China has risen rapidly. It is in cations Equipment (in 2012 American firms made 64% these sectors where China’s massive GDP and the partic- of the profit versus China with 2%) within the sector of ular nature of its political economy give it a competitive Electronics. Thus, while the provision of telecommunica- advantage. Four Chinese banks have rapidly ascended to tions services remains one of the most heavily regulated the ranks of the world’s top 100 corporations since the and nationally protected sectors in many countries of the mid-2000s.19 But it is uncertain whether this explosive world, in the advanced technology equipment and elec- ascent is structurally long-term or due to medium-term tronics used for telecommunications, American firms factors that are likely to change. China’s rapid growth dominate. over the past fifteen years has been heavily investment- In any case, the United States leads in a remarkable driven and dependent on high savings, leading to high eighteen of the twenty-five broad sectors of the top 2000 profits for the behemoth state-owned banks. And in corporations in the world, the creme de la creme of glo- response to the 2008–2009 global financial crisis, the bal capitalism. And if we maintain the benchmark for Chinese state implemented the second largest economic “dominance” unchanged since 1950 (40% or more), stimulus in the world, largely by channeling further then in 2012, the United States dominates twelve of the investment through its banks, boosting the latter’s profit twenty-five sectors (with an additional two sectors within to new heights. But as China attempts to move toward a three percentage points of 40%). The only other coun- consumption-driven economy, various regulations that try that dominates a single other sector is Japan in Trad- allow the banks to profit enormously will be re-regu- ing Companies. That is, despite the economic recovery lated, such as relaxing the ceiling on bank deposit rates or rise of scores of countries over the past half-century, (Rabinovitch 2012a). no other country apart from Japan dominates a single Thus, in the next five years or so, we will likely see Chi- sector, while the United States dominates twelve (and nese banks’ profit-share drop significantly (along with Japan only one). Furthermore, I have so far presented their Forbes Global 2000 rankings). In any case, the large data that underestimates American dominance because I showing of Chinese banks at the top of the list does not have assumed that American investors only own Ameri- necessarily indicate that these banks are currently out- can firms, and not also firms based in other countries. I competing their American, European, and Japanese shall now present data on whether this assumption counterparts internationally. Only ICBC and Bank of holds, and we shall see that it does not: American inves- China have made noticeable overseas expansions, and tors also own sizable shares of TNCs home-based in they are largely merely following and financing their Chi- other countries. nese clients’ operations abroad particularly in the extrac- I mentioned above that the US government successfully tion industry, such as CNOOC and PetroChina influenced many other governments to liberalize their (Rabinovitch 2012b). By contrast, banks such as Citigroup financial markets by the end of the twentieth century, and HSBC today are truly global in their scale and scope and Table 2 shows the fruits of that labor. The share of across the whole slew of banking and investment activi- American firms in cross-border M&As in the key target ties. In other words, Chinese banks engage in predomi- nations of the global political economy is by far the larg- nantly domestic activities and are largely nationally est, and in a number of countries, it has been increasing contained, so their massive profits are not necessarily at over the past three decades (such as in China, France, Germany, South Korea). And note the asymmetry: While 19 These banks are, in descending order with Forbes Global 2000 2012 rank the American share alone in many countries is over 20%, in parentheses: ICBC (5); China Construction Bank (13); Agricultural Bank of in the first decade of the twenty-first century, the combined China (19); Bank of China (21). foreign share (let alone a single country) of all M&As in 824 American Economic Power Hasn’t Declined

TABLE 2. US Share of Cross-Border M&As ! $1 million in Target Nation: 1980-2009

Target Nation 1980–1989 (Rank) 1990–1999 (Rank) 2000–2009 (Rank) Rank Change?

Asia (Top Three Nations for All Cross-Border M&As) 1. China <1% (#6) 10% (#2) 21% (#2) Increase 2. Japan 44% (#1) 55% (#1) 39% (#1) Same 3. South Korea 8% (#3) 35% (#1) 41% (#1) Increase Europe (Top Five Nations for All Cross-Border M&As) 1. UK 29% (#1) 39% (#1) 26% (#1) Same 2. Germany 19% (#2) 6% (#3) 35% (#1) Increase 3. Netherlands 37% (#1) 32% (#2) 21% (#2) Decline 4. France 21% (#3) 17% (#3) 21% (#1) Increase 5. Italy 16% (#4) 8% (#2) 15% (#3) Flux North America (Top Two Nations for All Cross-Border M&As) 1. US 89% (#1) 87% (#1) 84% (#1) Same 2. Canada 45% (#1) 71% (#1) 50% (#1) Same

Source. Thomson Reuters SDC. (Notes. US share in US is all M&As ! $1 million [not just cross-border]). the United States is only 16%. Therefore, American firms And not surprisingly given the deep post-war relationship are acquiring a much larger share of foreign firms in key between Japan and the United States that continues to markets than foreign firms are acquiring American this day, American shareholders account for the largest firms.20 foreign share. American ownership of the top twenty As a consequence of sustained acquisitions by Ameri- from the rest of the world excluding China (not shown can firms in key markets around the world over the past in Figure 3) is a mixed bag, ranging from the dominant couple decades, perhaps it is not surprising that by 2012 national owner of the Australian-domiciled BHP Billiton American firms combined own 46% of all publicly listed with a 68% share (as opposed to 12% Australian owner- shares of the top 500 corporations in the world, as ship) to less than one per cent of the Russian-domiciled Figure 2 reveals. This dominant American ownership of Rosneft (with 99% Russian ownership). Lying in between the top 500 corporations is despite “only” 167 with US- is the 36% American ownership of Gazprom (versus 64% domicile, or 33% of the total—not to mention the Uni- Russian) and the 28% American ownership of Samsung ted States “only” accounting for 22% of global GDP. This Electronics (versus 63% Korean). And while aggregate signifies how globalized American economic power has national ownership for most Brazilian firms is unavailable, become. Chinese capital, by contrast, is almost entirely American firms are often some of the largest individual nationally contained, as 29 Chinese corporations make owners in 2012, such as Capital Group with a 6% stake in the top 500, or 5.8%, and Chinese firms own 5.9% of the Banco Bradesco and Blackrock with 3%, 7%, and 11% top 500. This indicates not only that Chinese ownership stakes in Vale, Petrobras-Petroleo Brasil, and Itau Unib- of Chinese firms approach 100% (the vast majority— anco Holding, respectively [Forbes Global 2000 (2012) for including twenty of the top 20—are state-owned), but rankings; Bloomberg Professional for ownership]. that Chinese ownership of non-Chinese-domiciled firms The Chinese case, however, is more complicated. in the top 500 is negligible. Most Chinese firms in the Forbes Global 2000 are listed Figure 3 delves deeper by disaggregating the top four on both the Shanghai and Hong Kong stock exchanges average national ownership shares of the top 20 firms in with different ownership structures. In Shanghai, there four regions: The United States, European Union, Japan, are strict foreign capital controls with foreign owners and Hong Kong/China. Figure 3 reveals that American only accounting for 3% or less of the vast majority of shareholders are unequivocally the dominant owners of Shanghai-listed corporations, and with the Chinese gov- the top American corporations, at an average of 86% ernment often owning at least half. The shares used to ownership of all outstanding shares. While this point may calculate Chinese ownership of the top 500 corpora- seem trivial, the matter is quite different with European tions in Figure 2 are taken from their Shanghai listings. corporations. The number one combined national owner Figure 3, however, lists the national ownership of the of the top twenty European corporations is not Euro- Chinese firms’ non-controlling “H-shares” listed in pean, but American. As in Table 2, note the asymmetry: Hong Kong. American shareholders lead. Thus, Ameri- Foreign shareholders combined account for about 15% can investors reap the largest share of dividends paid ownership of the top twenty American corporations, yet to foreign shareholders. Also, if Shanghai gradually lib- American shareholders often account for more than 20% eralizes its financial market, American firms are in a ownership in each of the top twenty European corpora- strong position to benefit because of their already sig- tions. The top Japanese TNCs, however, are still owned nificant linkages with the top Chinese firms listed in predominantly by Japanese shareholders, albeit to a lesser Hong Kong. extent than American shareholders of American TNCs. There is one important caveat, however, to the data presented on aggregate national ownership. While it is clear that American firms dominate ownership of the 20 Due to limited space, I only present M&As and not portfolio invest- top 500 corporations in the world, it is not the case this ment. Hence, because American portfolio investment has also increased, the ownership equals the ownership of American citizens in M&A data underestimates the power of American TNCs. For a theorization of TNCs expanding their power via foreign ownership, see Nitzan and Bichler a one-to-one ratio. While the client confidentiality of 2009; for a classic account of asymmetric interdependence being a source of investment firms is legally protected, it is safe to assume power, see Waltz 1970. that American (as well as British, Swiss, and so on) Sean Starrs 825

50% 45.9% 45% 40% 35% 30% 25% 20% 15% 10% 7.9% 5.9% 5.8% 3.9% 3.0% 5% 2.2% 2.2% 1.7% 1.3% 0%

FIG 2. Top 10 National Owners of Global Top 500 TNCs, 2012. Source. Forbes Global 2000 (2012) for rankings; Author’s calculations from Bloom- berg Professional for ownership.

100% Japan 1% Luxembourg 1% Canada 2% #4 90% France 3% UK 4% Owner US 80% #3 20% Owner 70% UK 6% #2 Hong Kong Owner 60% France 10% 11% #1 50% Owner Germany US China 40% 86% 12% Japan 23% UK 70% 30% 15%

20% US US 31% 10% 24%

0% US EU Japan Hong Kong/China

FIG 3. Top 4 Average National Owners of Top 20 Firms by Region, 2012 Source. Forbes Global 2000 (2012) for rankings; Bloomberg Professional for ownership.

investment firms manage the wealth of at least some for- ure 1). That American GDP accounts for “only” 22% of eign clients. Thus, to get around this problem, I present global GDP, while the proportion of American million- data on the world’s wealthiest citizens as a proxy for the aires and total household wealth is 42% and 41%, respec- world’s most important investors. Figure 4 shows that tively, yet again demonstrates how globalized American 76% of the assets of North American millionaires is capital, American ownership, and American economic invested in North America, the highest of any region.21 power has become. We cannot rely solely on national This suggests that the majority of assets managed by accounts if we want to meaningfully assess power in the American firms is indeed ultimately owned by American global political economy. citizens (albeit the precise number is impossible to determine). Summary and Conclusion Thus, as American firms own 46% of the world’s top 500 corporations and American citizens ultimately own Corporations domiciled in the United States account for the majority share of American firms, it is not surprising the leading profit-share in eighteen of the twenty-five sec- that a whopping 42% of the world’s millionaires are tors of the top 2000 corporations in the world, and domi- American citizens, as Figure 5 shows. In fact, Figure 6 nate across an extraordinary twelve sectors. From 2006 to reveals that 41% of all global household assets (not just 2012, this leadership has increased in six sectors, includ- millionaires’) is concentrated in North America, even ing in Computer Hardware and Software, Financial though by GDP the Asia-Pacific, North America, and Wes- Services, and Media. American firms also make a top tern Europe are roughly equal at a quarter each (see Fig- three presence in a further three sectors, thus having a top three presence in twenty-one of the twenty-five sec- 21 CapGemini and Merrill Lynch (2011:4) defines “millionaires” as those with tors. Its nearest competitor is Japan, whose firms account “investible assets of US$1 million or more, excluding primary residence, col- for the dominant share in one sector (the only other lectibles, consumables, and consumer durables.” nationality that dominates a single sector), the second 826 American Economic Power Hasn’t Declined

100%

90% 9% 12% 80% 10% In Asia- 70% Pacific 60% 57%

50% 56% In Europe 40% 76%

30% 7% In North 20% America

10% 23% 25%

0% North American Assets European Assets Asian-Pacific Assets

FIG 4. Regional Distribution of Triad Millionaires’ Assets, 2010. Source. CapGemini and Merrill Lynch 2011:19, ﬁgure 11.

45% 41.8% 40% 35% 30% 25% 20%

15% 12.2% 10% 8.9% 4.6% 3.2% 5% 2.6% 2.2% 2.2% 1.7% 1.4% 0%

FIG 5. Top 10 National Shares of World’s Millionaires, 2010. Source. Author’s calculations from Boston Consulting Group 2011:9, Exhibit 4.

45% 41% 40% 35% 30% 27% 26% 25% 20% 15% 10% 6% 5% 0% North America Asia Western Europe Rest of World

FIG 6. Triad Share of Global Household Financial Assets, 2011. Source. Allianz 2012:47, 55, 75; Rest of World is author’s calculation. largest in three sectors, and the third largest in five—a tainly risen rapidly and has a leading (not dominant) top 3 presence in nine sectors.22 Clearly, no other nation- share in two sectors, but on closer inspection its relative ality even begins to approach the dominance of American shares are not as large as one might expect from the glo- firms across such a vast breadth of sectors. China has cer- bal share of its national accounts. That is, in the era of nationally contained capital, the rise of West German and 22 The United Kingdom also has a presence in nine sectors, but none in Japanese GDP correspondingly meant the rise of West the top spot. German and Japanese firms across a sizable breadth of Sean Starrs 827 sectors. Indeed, in those sectors that the Chinese state 2003; Arrighi 2007) who claim that hegemony based on most heavily protects and regulates—and are most nation- economic preponderance is historically cyclical, we must ally contained—Chinese firms have made a significant recognize that the expansive dominance of American cap- presence in the Forbes Global 2000: Banking; Construction; italism is historically unique. Hence, we must be cautious Forestry, Metals and Mining; Insurance; Real Estate; Tele- of historical comparisons with and trans-historical theo- communications; and Transportation.23 Many of these retical extrapolations from the experience of past domi- Chinese firms do not compete transnationally, however, nant powers. The most common historical comparison, and so their rise should not necessarily be seen as at the of course, is to Britain in the nineteenth century, but expense of firms domiciled elsewhere that are transna- even after Britain underwent an industrial revolution and tional. In fact, the rapid expansion and deepening of the became “workshop of the world,” China still had the larg- Chinese domestic market itself often benefits foreign est economy in the first half of the nineteenth century, TNCs at the expense of Chinese firms, as in aircraft, auto- and Britain could not maintain its lead over a rising mobiles, beverages, communications equipment, retail, Germany and the United States in the latter part of the and semiconductors, among many others. century (Lieber 2012). By contrast, the United States has Furthermore, the depth of American profit-shares maintained broad economic dominance over the past across the expanse of global capitalism actually underesti- seven decades in the face of the recovery and/or rise of mates American economic dominance because American Western Europe and Japan, South Korea and Taiwan, investors also own sizable shares of corporations domi- Australia and Canada, and more recently Brazil, China, ciled outside the United States—sometimes even the India, and Russia (not to mention the rise and fall of the dominant share. American firms own a combined 68% of Soviet Union), among others. the Australian-domiciled BHP Billiton for example, which Therefore, perhaps the most important question is in 2012 has a stunning 14% profit-share in the $172 bil- how do we explain the capacity of the United States to lion Forestry, Metals and Mining sector. More broadly, maintain its power throughout fundamental transforma- American firms own 46% of the world’s top 500 corporations in the global political economy spanning nearly tions (despite “only” 33% of the top 500 with US-domi- three-quarters of a century? An important contribution is cile), which is almost six times greater than its nearest Susan Strange (1987) on American structural power, or competitor, Japan. And note the asymmetry of cross-own- the capacity of the US state to shape the structures within ership: While the American share in many non-American which others act, namely the liberal international eco- corporations reaches 20% or more, the total combined nomic order. She also emphasizes the international role foreign share of top American corporations is usually no of the dollar as the “super-exorbitant privilege,” both for more than 15%. Americans own much more of the world the US state and US firms. A problem in Strange, how- than the rest of the world owns the United States, and ever, shared by many in International Political Economy, this asymmetric interdependence leads to asymmetric is the conceptualization of the relationship between state power. Perhaps one of the clearest manifestations of this and capital as interacting but still structurally distinct and is that American citizens continue to own the dominant often antagonistic (see Strange 1996). Critical political share of global wealth at 40% or more, despite the global economy attempts to address this false dichotomy by con- share of US GDP steadily declining over the past half-cen- ceptualizing state-society complexes, in which the rela- tury to less than a quarter since 2008. tionship between state and capital is organically What theoretical implications can be drawn from this integrated via class analysis (Cox 1987; Gill and Law data? Perhaps the most obvious is a counterpoint to those 1988; Panitch and Gindin 2012; Saull 2012; Starrs 2013). who believe that globalization has made the world “flat” Within this literature, however, there is disagreement on (Zakaria 2011; Friedman and Mandelbaum 2011) or that the nature of the American state-society complex in world the nationality of capital no longer matters (Reich 1991; order, from decline (Cox 1987) to vulnerability (Gill Robinson 2004). While globalization by definition is the 2004) to persistence (Saull 2012). expansion and deepening of cross-border flows (from Stephen Gill (2004) illuminates the deep academic, global communications to global travel; global capital to civil society, commercial, cultural, diplomatic, military, global cultural exchange), the power to profit from these and migrant linkages the United States has cultivated flows remains highly vertical with the United States at the with the other major capitalist powers since at least 1945 summit. More specifically, the world’s top TNCs now (in some cases earlier), thereby greatly enhancing Ameri- operate across the globe, but they are still predominantly can structural power. Despite this, with soaring balance of based in a small group of nations—the United States far payments deficits and government debt, Gill (2004:34) more than any other—and their ownership structures are expounds a common refrain shared amongst those who still nationally concentrated. As a consequence, wealth— argue for American decline: As financial crises since the while geographically dispersed perhaps more than ever 1980s have become increasingly regular and severe, the before—is still highly nationally concentrated. American next major financial crisis could emanate from the Uni- investors more than any other nationality profit when ted States itself, sparking a collapse in global investor TNCs profit, regardless of the latter’s nationality or geo- confidence “with the US hoist on its own petard.” graphical location. Indeed, rather than the “globalization By contrast Leo, Panitch and Sam Gindin (2004:73) of capital,” perhaps more apropos would be the “Ameri- argue that precisely because of these deep interlinkages canization of global capital,” as American ownership in —especially via foreign investment—between the major other key regions of the world has increased since the capitalist powers cultivated since 1945, a crisis in America early 1990s (see Table 2). is not an “American crisis,” but a crisis for all. In regard Moreover, to those across a wide spectrum of theoreti- to corporate ownership, these interlinkages are borne out cal orientations (Gilpin 1987; Kennedy 1988; Wallerstein in Table 2 and Figures 2–4, and surely, the 2008 Wall Street crash and subsequent Great Recession is no better 23 Over the past decade Chinese firms have also risen in Oil & Gas, but vindication of the aphorism “when America sneezes the from 2006 to 2012 have declined from fourth to fifth place (see Table 1). rest of the world catches a cold.” But the opposite is also 828 American Economic Power Hasn’t Declined true: When America prospers so too do a generous share Street.26 As for sluggish American growth in the Great of the global investor class. It is this relative openness Recession, what is more important to the investor class is and dense web of interlinkages with other great powers not growth rates relative to the past but relative to pres- (which neither China nor Japan share) that render the ent competitors.27 And in this regard, American growth is American state-society complex unique in world history stronger than in Europe or Japan, and key “emerging and is essential to understanding its endurance (Panitch markets” such as Brazil, China, and India are significantly and Gindin 2012). slowing. In fact, from 2011–2012, the American stock The broader point about the US dollar as global cur- index has been the best performing and the Chinese the rency and US government debt as the world’s premier worst performing of the world’s major indices (Chisholm safe-haven asset in the global financial system is that there 2012). Again, if it is difficult for some theoretical orienta- is no alternative (to borrow Margaret Thatcher’s mantra). tions (such as liberalism and realism) to reconcile persis- And if the euro has failed to present a serious global tent American economic dominance with declining living challenge beyond the European Union (Cohen 2009), standards for most American people, critical political what chance is there for the renminbi with the much economy rejects the assumption that the interests of the smaller Chinese financial market (even if Chinese capital American capitalist class align with the interests of Ameri- accounts liberalize in the next decade or so, which is far can workers, not to mention the biosphere. from certain)? Also, Chinese dollar and US Treasury bill We live in the age of globalization. But we also con- (T-bill) hoardings have continued to rise since 2008 tinue to live in the age of American economic domi- despite frequent threats to seek alternatives (Morrison nance. In fact, American structural power has increased and Labonte 2011), largely because the United States is since the 1950s. While the American share of global GDP the only country that can run persistent balance of pay- was certainly larger half a century ago, domestic markets ments deficits—because of the global role of the dollar around the world were much more closed and nationally and T-bill (a self-reinforcing system and source of unprec- contained—not least the USSR and Maoist China. But edented structural power). In addition, even when Stan- beginning with US-led globalization in the 1960s and US- dard and Poor’s downgraded US government debt in led liberalization in the 1980s, coupled with the collapse August 2011 for the first time ever, far from capital flight, of the Soviet Union and the great opening and rise of global investors responded by buying more US govern- China, among others, by the twenty-first century Ameri- ment debt—simply because there is no comparable “risk- can structural power straddles the globe like never free” asset in times of uncertainty (Sullivan 2011). The T- before. Thus, contemporary world order is probably just bill market is by far the deepest, most liquid, and safest as unipolar economically as it is militarily. As there is no financial market in the world.24 Thus, it serves as the uni- alternative to the US dollar and T-bill, no other state has versal rate of return against which other assets are bench- the structural capacity to maintain global capitalism, and marked. And because it is the foundation of global no other nation approaches the dominance of American finance and there is no plausible alternative system on TNCs across such a wide breadth of sectors. And with the the horizon, a collapse in confidence in US government globalization of corporate ownership, American investors debt would be tantamount to a collapse in confidence in also profit from the operations of non-American TNCs global capitalism. Or, as a Congressional Report (Morri- and vice versa, as the global investor class depends on son and Labonte 2011:18) put it: American prosperity more than ever: All for one and one for all. But this interdependence is asymmetric—the root Problems experienced in U.S. financial markets over of structural power—as the American state-society com- the past few years have been widely viewed as ‘once in plex remains the richest and most powerful in the world. a lifetime’ events. If these events failed to cause a sud- Hence, American economic power has not declined—it den flight from U.S. assets and an unwinding of the has globalized, and we must move beyond national current account deficit by China or other countries, it accounts and take globalization seriously in order to ade- is hard to imagine what would. quately conceptualize this transformation. This is not to say that the United States does not have serious problems, from high inequality and unemploy- References ment to sluggish growth. Hence, another insight from Alcoa.com. ( critical political economy is that there is no assumption June 28, 2011). President Obama’s Visit Showcases Alcoa’s that the continued power of the American investor class Advanced Manufacturing Capabilities. Available at http://www. 25 alcoa.com/locations/usa_davenport/en/news/releases/news_detail. correlates with increasing living standards for all. asp?xpath=president_obama_visits_recap. (Accessed November 11, Indeed, as mentioned above, the opposite is often true: 2012.) The more profit the investor class accumulates, the less Allianz. (2012) Global Wealth Report 2012. Available at http://www. wages workers receive; hence soaring inequality, as is well- allianz.com. (Accessed November 11, 2012.) known from Joseph Stiglitz (2012) to Occupy Wall Arrighi, Giovanni. (2007) Adam Smith in Beijing: Lineages of the Twenty- First Century. New York: Verso. Bacevich, Andrew. (2002) American Empire: The Realities and Consequences 24 It is safest because while there can be political gridlock in the United of U.S. Diplomacy. Cambridge, MA: Harvard University Press. 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See Nitzan and Bichler 2009, Di Muzio 2013 for a new approach towards a theory of capitalism. 27 Or the distinction made by Nitzan and Bichler 2009 between absolute 26 See Brennan 2012 for empirical analysis on this relationship in Canada. and differential accumulation. Sean Starrs 829

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